Biden Should Approve the Nippon Steel Deal
President Joe Biden has consistently opposed the proposed acquisition of Pennsylvania-based U.S. Steel by the Japanese competitor Nippon Steel but hasn’t yet formally blocked its completion. Donald Trump is also an opponent, and in the aftermath of his November 2024 victory, he reiterated his intent to scuttle the deal.
But the substantive case against the sale is weak, and recent developments have only made it weaker. And the political incentives driving Biden’s opposition have vanished. To protect American jobs and increase investment in the American economy, for one of his last acts in office, he should rise above misplaced nationalism and approve the sale.
Throughout 2024, the political stars lined up against the acquisition. When the two companies announced the sale in December 2023, the following month, Donald Trump pledged to block it based on crude nationalist logic: “We saved the steel industry. Now, U.S. Steel is being bought by Japan. So terrible.” In March, Joe Biden, then a candidate for re-election who believed union backing was essential to winning the Keystone State, released a terse statement little different than Trump’s: “U.S. Steel has been an iconic American steel company for more than a century, and it is vital for it to remain an American steel company that is domestically owned and operated.” Six days later, the United Steelworkers [USW] union repaid Biden with its endorsement.
Pennsylvania’s two Democratic senators–Bob Casey and John Fetterman–opposed the sale right out of the gate. Casey’s Republican general election opponent, Dave McCormick, did as well, though USW backed Casey. After Biden dropped out of the race, Kamala Harris declared in a Labor Day address, “I couldn’t agree more with President Biden, US Steel should remain American owned and American operated.” Harris retained the United Steelworkers endorsement.
Yet neither Harris nor Casey won Pennsylvania. Exit polls indicate each won a respectable, if not overwhelming, 56 percent of the union household vote. (Harris actually performed better than Biden with Pennsylvania union households, as Biden lost them to Trump by two points in 2020. However, exit poll data is notoriously imprecise.) But 80 percent of the swing state’s electorate live in non-union households. Winning the union vote, while helpful to Democrats, is not sufficient.
Moreover, rank-and-file steelworker union members in Pennsylvania were not all in sync with national leadership on the Nippon deal. Jason Zugai, a vice president of a Pittsburgh local USW chapter, recently said, “I walk the floor every day and I have over 95% of the members that are for the deal,” and argued, “This incredible deal will solidify our jobs for decades to come.” Winning union leadership is not the same as winning rank-and-file members.
To put it more simply: The 2024 election is over. Democrats lost Pennsylvania. Nationalistic pandering on steel didn’t work. And Biden will never face the voters again. He does not need to bring political calculations into the Nippon Steel equation. He can rule strictly on the merits.
The Washington Monthly explored the merits from all angles earlier last year. Mike Lofgren, a former congressional aide, made a case for approval, and Garphil Julien, a former advisor to Biden’s National Economic Council, argued for rejection.
Julien’s primary point, made last April, was that the steel industry is a major contributor to global warming. Nippon Steel—while talking a good game—has a poor track record regarding the decarbonization of steel production. He praised Biden for “negotiating with other responsible governments to form a Global Arrangement on Sustainable Steel and Aluminum,” which “would set high tariffs on carbon-intensive steel imported from countries with unsustainable practices.” While we need to “promote a global transition to green steel,” a “purchase of U.S. Steel will leave foreign investors controlling still more of America’s strategic industrial base, and not in a way likely to spur investment in green technology.”
Unfortunately, Julien’s green argument has been rendered moot. Biden will leave office without a global agreement on sustainable steel, and there is no reason to believe Trump cares more about it than he did the Paris climate accords, which he jettisoned in his first term. Whether or not the Nippon Steel sale goes through, there will be no Trump-led global transition to green steel.
Lofgren’s case is still relevant.
In the nationalistic statements of Biden, Trump, and other politicians, there is an implicit argument that foreign ownership of U.S. Steel would threaten national security. As reported by The New York Times, a few weeks ago in a final White House review, the Committee on Foreign Investment in the United States [CFIUS]—composed of several top Biden administration officials—“voiced concerns that the transaction could pose a national security threat to the United States by potentially leading to a decline in American steel production because of the other global business considerations that Nippon must weigh.”
Lofgren argued the national security concern was misplaced because the “contention that the U.S. Steel sale to a Japanese company would endanger national security is fiction. The Pentagon has estimated it needs only about 3 percent of annual domestic steel production to fulfill its needs.” Furthermore, Nippon will likely have an incentive to maintain domestic production: “Some steel analysts say that Nippon believes Joe Biden’s infrastructure program will stimulate domestic demand for steel. Therefore, Nippon’s logical course is to become an American producer as the administration enforces the Buy American provisions of the Bipartisan Infrastructure Act.” Unlike promoting green steel, enforcing Buy American provisions is a policy the incoming Trump administration would likely continue.
National security concerns were not widely shared enough to compel CFIUS to recommend rejecting the sale. In fact, because of internal divisions, CFIUS made no recommendations. According to the Financial Times, the State, Defense, and Treasury secretaries—all of whom are part of CFIUS—did not find a national security risk. Also, Treasury Secretary Janet Yellen, while not publicly expressing support for the deal, has implied support by talking up the benefits of foreign investment. But the United States Trade Representative Katherine Tai remains a strong opponent.
Nippon Steel is sweetening the offer in a last-ditch effort to save the deal. The Washington Post reports that this week, “Nippon Steel offered a 10-year guarantee that it would not reduce production capacity at U.S. Steel’s mills in Pennsylvania, Indiana, Alabama, Texas, California and Arkansas without approval by the Treasury-led review panel … The new language goes beyond Nippon Steel’s previous agreement to limit any production cuts to those approved by independent members of U.S. Steel’s board, who would be appointed subject to CFIUS approval.”
The Post noted that “Nippon Steel has already pledged $2.7 billion in new investment for U.S. Steel’s unionized operations in Pennsylvania’s Mon Valley and in Gary, Indiana.” A bigger commitment to maintaining production levels could require billions more. Even though this is a “foreign” investment, money goes into America, not out. To reject it out of nativist fear is to literally turn down money.
The additional concessions give Biden a legitimate claim to abandon his past opposition, whereas blocking the sale keeps the status quo. And the status quo is not great for Pennsylvania, its steelworkers, or domestic steel production. U.S. Steel has been dying slowly for years, and Nippon Steel—a company from an allied nation—is offering to invest billions to bring it back to life.
Biden need not end his presidency emulating Trump’s myopic nationalism and phony nostalgia. The rational move is to approve the sale.
The post Biden Should Approve the Nippon Steel Deal appeared first on Washington Monthly.